First home buyers claimed a record share of the housing market in June

Property / news

Sharp drop in the number of first home buyers getting into a home of their own in June, but they are now the single biggest buying group in the housing market

30th Jul 24, 9:55am by Greg Ninness

The number of first home buyers purchasing a home of their own in June fell sharply, although the decline wasn't as severe as it was for the overall market.

According to the Reserve Bank, 2195 mortgages were approved to first home buyers in June, down a substantial 19% compared to May.

However although that decline was significant, the drop in overall housing market activity was even greater, with the Real Estate Institute of NZ reporting 4356 residential sales in June, down a whopping 31% compared to May.

That suggests most of the sales decline reported by the REINZ in June was from investors and existing owner-occupiers. This pushed first home buyers' estimated market share of housing sales in June, mortgages approved to first home buyers as a percentage of REINZ sales, to a whopping 50.4%.

That is an all time high outside the peak Covid period in 2020, when the figures became briefly volatile and unreliable.

Although first home buyers' actual share of residential mortgages will be lower than the 50%+ indicated above, because not all sales are conducted through REINZ members, it is still extremely likely their market share is at an all time high, even though their absolute numbers are falling.

It should not be a surprise that first home buyers share of the market is peaking when the overall market is doing a freeze.

That's because the motivations are different for first home buyers than they are for investors or owner-occupiers.

First home buyers are making decisions that will affect the rest of their lives, so are more focused on the very long term and less on the immediate outlook.

They also have very strong emotional drivers to get into a home of their own, whereas investors are more focused just on financial considerations while owner-occupiers contemplating a move usually have less urgency in their decision making process.

Essentially that means if first home buyers can afford to buy a property then they probably will, regardless of what the rest of the market is doing.

That tends to make the volume of purchases by first home buyers less volatile than those of investors and owner-occupiers, even in market downturns.

Interest.co.nz estimates the average amount first home buyers paid for a home in June was $661,000, and just over a third of them (34.1%) took out a low equity mortgage with less than a 20% deposit.

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138 Comments

by Yvil | 30th Jul 24, 10:07am 1722290834

First home buyers are making decisions that will affect the rest of their lives, so are more focused on the very long term and less on the immediate outlook.

Essentially that means if first home buyers can afford to buy a property then they probably will, regardless of what the rest of the market is doing.

Very well said, few understand this.

by Greg Ninness | 30th Jul 24, 10:23am 1722291816

Yes, but unfortunately far too many of them can't afford it.

by bw | 30th Jul 24, 10:24am 1722291886

Exactly.

by Yvil | 30th Jul 24, 10:41am 1722292879

We all make our own life decisions Greg. If we buy something we can't afford, we have only ourselves to blame. (although most will try to blame others, circumstances etc...)

by Murray Falconer | 30th Jul 24, 12:33pm 1722299611

We all make our own life decisions

True, but we don't control when we were born, when we're capable of reproducing (assuming a desire to do so).

NZ's housing market, particularly in Auckland, has been irrational longer than the window available to have a family for some. The property market stayed irrational longer than some could remain solvent (fertile). I think there should be some support for FHB's in trouble, but not a handout, they'd have to give up equity or something so that those that didn't buy aren't disadvantaged. It would be so they can use the home as a home, not prop them up from an investment perspective.

by Pa1nter | 30th Jul 24, 12:47pm 1722300426

We can control where we live. Actually there's so much of our own actions we can control, but everything has compromises and contingencies.

Auckland's been a rat race for many for quite some time now. As have most major cities. This is because capital owners have all the advantage, and the majority of the population are at their mercy.

by Solid_Granite | 30th Jul 24, 1:03pm 1722301385

Owning a home is not a prerequisite to starting a family.

by Pa1nter | 30th Jul 24, 1:15pm 1722302159

It's not, but there's usually some societal or cultural underpinnings for starting a family.

In Japan for instance, only 3% of children are born out of wedlock. But marriages are at an almost century low, hence no babies.

In NZ, we have a compounding issue with females over representing at Universities. This means the age at which a woman is 'ready' for starting a family, after 3-5 years of study and 3-5 years of career building, has only increased. And then been compounded by a decline in this demo forging sound relationships, possibly elevated again by there being a smaller relative population of more successful males to couple up with.

by Rampart | 30th Jul 24, 2:27pm 1722306451

No cause evictions “Hold my beer”

by pacifica | 30th Jul 24, 8:38pm 1722328717

Lol this. The number of young families tossed out of rentals that I know simply because they have kids (versus child free tenants) I stopped counting. When it comes to stats knowledge the KO waitlist and emergency housing records those with children who cannot get into rentals due to the "we found other tenants" factor. Sadly though when they had kids to begin with many had housing already and then life & natural circumstances forced them to lose what they had and go renting, e.g. town floods, medical costs, job losses etc.

by powerupkiwi | 30th Jul 24, 10:15pm 1722334512

What’s the obsession with home ownership before having children? It’s weird. Are people using kids to indulge their own neuroticism? We’re descendants of hunter gatherers; kids don’t care.

by interesting1234 | 31st Jul 24, 8:05am 1722369941

Kids cost money that could otherwise be saved, therefore if you choose to have kids before purchasing a home, which is easily possible, the argument being that it will take a lot longer, or a lot harder work to save the deposit and have the spare income to afford the mortgage.

by Murray Falconer | 31st Jul 24, 2:20pm 1722392406

The context of my comment was in response to the concept of people taking personal responsibility for their decisions/actions PUK.

Some would argue that taking personal responsibility with respect to having children extends to securing shelter for them. My point was merely that doing the 'responsible thing' has been a pretty tall order in recent times.

So no, owning a home isn't a prerequisite, but I'm also not going to pretend uprooting a family and changing schools multiple times due to the landlord selling or having family move in (why can't they rent somewhere else if living in a rental is an equivalent option...) is a positive.

Does the hunter gatherer option apply to things you 'own', or are 'your' possessions not part of the wild? What's a crime in your world?

by interesting1234 | 1st Aug 24, 8:29am 1722457777

Sadly Murray we live in a world where taking personal responsibility is getting less and less common as years go by. We have politicians skirting responsibility and accountability, we have crimes with minimal punishment if at all, and an increase in the prevalence of mental health struggles which often get used as a scapegoat for many.

by J.C. | 30th Jul 24, 12:34pm 1722299657

This is true Dr Y. Maybe we can follow the Canadian govt allowing first-time homebuyers to take out 30-year insured mortgages for newly built homes, all in the name of making homeownership more affordable. Starts from Aug 1. The Anglosphere is loyal to the Ponzi. Or perhaps closer to reality, the ruling elite knows very well that the Ponzi cannot be allowed to wilter.

by Northlander09 | 30th Jul 24, 2:30pm 1722306635

What do you suggest they do, rent for life?

by Sluggy | 30th Jul 24, 3:32pm 1722310365

Nothing wrong with that. I owned a home for 10 years, been renting for 16, admittedly now living on a boat on the high seas. Pretty free life not having to deal with a house anchor.

by Baywatch | 30th Jul 24, 4:21pm 1722313318

How many tadpoles did you have/raise Sluggy?

by Sluggy | 30th Jul 24, 9:34pm 1722332067

3 humans, all adults now. 4 dogs. Nothing else to declare.

by bookworm69 | 31st Jul 24, 9:52am 1722376348

People with children have to think about schools and the security that having your own home provides them, so they don't have to constantly change schools if they suddenly have to leave their rental.

by Sluggy | 31st Jul 24, 5:16pm 1722402984

I have 3, they survived admirably. Plumber, builder (ex), and film maker(struggling artist)

by Nzdan | 30th Jul 24, 10:55am 1722293706

Not true, I have it on good authority according to the Facebook replies to another news site's article just yesterday:

Many can afford it if they'd just cut down on iPhones and other luxuries. "Give up the treats" and live frugally.
Young people want to start out in the "best home". An expectation gap that needs addressing.
Brainwashing: "They're told multiple times a day that it's unaffordable" that they believe it.
- (Previous generations were told the opposite, so they just got on with it).
"My daughter/niece bought their first home last year so it's definitely doable. Just work hard like they did and please don't ask for specific numbers it's none of your business".
It's just poor attitude, people should just sacrifice.

by HouseMouse | 30th Jul 24, 11:11am 1722294676

Lol

by Zwifter | 30th Jul 24, 11:25am 1722295532

Basically its true. When I get told someone I know spent $750 on her haircut, there is no hope for some people. A couple both working with reasonable jobs that are prepared to get in a flatmate can do it. If you are not prepared to compromise then keep on renting for life. FHB with the right priorities are clearly still buying houses.

by Pa1nter | 30th Jul 24, 11:55am 1722297352

But....

We want it to be like the 1960s still.

With 2020s personal abundance.

by Small Kev | 30th Jul 24, 12:13pm 1722298430

“Basically it’s true. When I get told someone I know spent $750 on her haircut…”

This and also money spent on alcohol on Friday/Saturdays nights. Some $100 plus dollars at the pub…

by Pa1nter | 30th Jul 24, 12:25pm 1722299151

$100 doesn't buy much fun out on the town.

It's is a cruel trap though, we have a limbic economy that's designed to hook you into empty pleasures.

by interesting1234 | 30th Jul 24, 3:29pm 1722310146

Nothing like the classic pre-load and take a sneaky hip flask out with you. This strategy is age old XD

by Nzdan | 30th Jul 24, 12:26pm 1722299207

All very helpful and factual anecdotes. I assume you've quizzed each and every young person at the pub on their home ownership status?

by mfd | 30th Jul 24, 1:35pm 1722303352

Kids and young people are generally much better behaved than they used to be. Many don't even drink, let alone doing drugs. Savings rates tend to be higher than previous generations at their age.

Easier to point at the outliers and assume their problems infect a whole generation though, isn't it? And to conveniently forget about what we got up to at the same age...

by interesting1234 | 30th Jul 24, 3:31pm 1722310270

I'd have to say with the decrease in drinking with youth, the prevalence and social acceptance of drugs is on the rise. For an example, try taking a bus home from a city centre at 2am and see all the kids gurning their way home XD

by M0ralHazard | 30th Jul 24, 3:44pm 1722311070

How bout looking at the actual data rather than your anecdotes from your bus trip home?

by interesting1234 | 30th Jul 24, 4:34pm 1722314065

I'd be more than happy to see the data if you have links?

by 1harlow1 | 31st Jul 24, 4:00pm 1722398419

Lol yes I wonder who holds this data.

You are completely correct though, it's socially acceptable these days amongst the kids to take hard drugs. In my day you were considered a deviant if you partook.

by mfd | 30th Jul 24, 5:15pm 1722316515

It's tough, isn't it? Boomers complain when you spend a hundred bucks on booze, and they complain when you spend a fraction of that on a couple of pills instead.

Maybe MDMA is the sensible action these days to build up a deposit?

by Pa1nter | 30th Jul 24, 6:14pm 1722320052

Or a way to become totally disinterested in following the status quo.

by malamah | 30th Jul 24, 1:51pm 1722304290

If it was affordable and made financial sense, prices would be flat in real terms to wages. But they are falling, real and nominal.

FHB with the right priorities, the right jobs, the right pay, the right parents, the right boarders and the right amount of dependants (typically none) are buying.

by pacifica | 30th Jul 24, 8:51pm 1722329505

Is their job personal image based? Many in sales & fashion have image requirements to maintain for the exact reason that sex sells and here is a clue inflation hits everything. A full recolour job that used to be under 100 now costs well above 500.

Now I have not gone to a hairdresser or barber in over a decade myself, I follow the costings from family who work there, but I do understand the huge pressure and requirements on the fairer sex to "look the part" to both get a job and to maintain & perform it. The requirements on them are far in above that of men and that the costs they face to do so are exorbitant. Just look at the costs of simple makeup like foundation & eye liner... which I also used in the past for sunny (to cover facial scarring from injuries & rash at events) or goth days. The costs for the basics can go well over 500 alone and that is even for a guy, for women there is far more often expected by employers and society.

by powerupkiwi | 30th Jul 24, 10:18pm 1722334739

Very few of these people will rent for life, whatever reckless financial decisions they make. Over that timeline, the market will meet them in the middle. House prices are going nowhere

by dla06c | 30th Jul 24, 1:10pm 1722301803

... Gosh I hope this is satire... If not "Good authority" and "Facebook replies" in the same sentence scuddles everything else you say.

by Nzdan | 30th Jul 24, 1:15pm 1722302127

Yes, it's satire. Poe's Law and all that.

by Rampart | 30th Jul 24, 2:31pm 1722306677

I hear this all the time from boomers “our first house was a small 2 bedroom house, why do first home buyers need 3 bedrooms and 2 bathrooms?” The only way on to the property ladder for many is delaying children to focus on their careers, by the time they’re in a position to afford a home they’re also ready to have a house that’s suitable to raise a family.

by K.W. | 30th Jul 24, 3:42pm 1722310955

A 2 bedroom still allows you to have kids - one bedroom for the parents, one bedroom for one or two kids. So they dont need to upgrade until the kids are too old to share a bedroom. This whole "kids have to have their own bedrooms" is also a recent trend. In the past, kids shared and nobody thought there was anything unusual about that.

by Rampart | 30th Jul 24, 4:18pm 1722313105

But where does my home office, guest room and media room come into the equation ;)

by pacifica | 30th Jul 24, 8:53pm 1722329606

But where does the flatmate or border go who is helping them afford the mortgage?

by phalanax | 30th Jul 24, 11:59am 1722297562

Which is likely why home ownership rates are sliding into a deep dark hole for many ... FHB's are no where near where they need to be .... lets just tell the truth...most folk are priced out of the market and have been for sometime......."We're now at a point where your family has to be rich to get into the housing market, or you have to be lucky enough to marry into wealth," economics commentator Bernard Hickey said. According to this report Home ownership will be below 50% by 2048... So half the country likely will be renters ...is that what folk will vote for? Currently I guess its...the rise of the Landlords .....unless someone with political sway can push that agenda back the future generations will find themselves serfs forever under feudal landlords....lol .

https://www.1news.co.nz/2024/07/22/home-ownership-rates-fall-below-60-r…

by HouseMouse | 30th Jul 24, 11:53am 1722297224

Neo-feudalism

by Pa1nter | 30th Jul 24, 11:57am 1722297476

Coupla people think we're actually in Techno-fuedalism.

https://www.youtube.com/watch?v=Q9lJQONTC7Y&ab_channel=Channel4News

by powerupkiwi | 30th Jul 24, 10:21pm 1722334872

Jeff Bezos isn’t showing up to block that housing development. It’s feudalism by bogan NZ boomers.

by interesting1234 | 30th Jul 24, 3:27pm 1722310059

Circumstantially dependent of course. Many have saved over the last few years, gained large salary increases and reasonable returns on TD's and some on call savings accounts which have been on offer. Given the increased ability to save for some, this can equate to a lower mortgage, especially if expectations have been tempered in terms of 1st house, location, consider Aucklanders moving elsewhere in the country as an example for a different lifestyle and more affordable options, while taking their greater savings with them due to greater salaries on average in AKL.

Yes I agree prices need to come down still, but there are factors needing consideration also.

by pacifica | 30th Jul 24, 8:57pm 1722329838

Lol you think TD exceeded inflation rates. If you had money in a TD you were losing it, just not as fast as in a savings account (which was so bad it was near indistinguishable to an online basic account but with less functionality).

by interesting1234 | 1st Aug 24, 8:30am 1722457854

TD's may not always exceed inflation, but for many it is money they would not otherwise have had, and for doing essentially nothing. I understand that returns on a real scale should exceed inflation, but I personally don't feel like life is going backwards if they aren't.

Edit: Grammar

by malamah | 31st Jul 24, 1:44pm 1722390288

And for TD as an asset increasing in value against, say, housing as an asset decreasing in value? Or is the expectation that everybody is cashing out their TD to pay rent, buy veges and a new car?

What about against money supply, which has barely moved in over a year. If you have more dollars from a TD than you did two years ago, you have a greater chunk of the same pie. You can then use that chunk of pie to leave NZ, or buy assets you consider have capitulated and will turn upward, whatever. TD has been a great low risk option for a year or two depending on your own personal objectives.

Would you give up the option of one shadoink in favour of two badoinkydoinks if your real goal was three shamoozles and badoinkydoinks dont buy shamoozles but shadoinks do???

by interesting1234 | 1st Aug 24, 8:31am 1722457903

hahaha

by CN - new | 30th Jul 24, 11:09pm 1722337769

"Yes, but unfortunately far too many of them can't afford it"

Case in point for this owner occupier buyer. There are likely to be thousands of households in NZ facing similar circumstances. In negative equity so more than 100% loss of their savings used as a deposit to buy (and very likely to be their entire lifetime of savings). Their future financial trajectory is forever changed.

https://www.facebook.com/groups/kiwifirsthomebuyers/posts/8220227754664…

by CrispyKahawai | 30th Jul 24, 10:32am 1722292324

That’s clearly a simplification, I’m not convinced that *you* get it. And you forgot the most important bit:

“…even though their absolute numbers are falling.”

I suspect there are plenty of first home buyers out there biding their time, despite being able to afford it now.

by 1689 Baptist | 30th Jul 24, 11:28am 1722295739

The average lower quartile house has gone up about 10k in the last year, so I am not sure the biding your time even when you can afford today approach is the best course of action. Depending on the location of course

by Thats All Folks | 30th Jul 24, 2:39pm 1722307146

Nobody cares about the average or the short term election variance. Even the non-informed in a position to buy are slowly getting the message and sitting on the sidelines, building a war chest becoming extremely picky and indifferent to making a decision.

The amount of friends who are desperately regretting maxing out their borrowing power for a heavily depreciating asset is significant and those that didn't are comfortably watching their buying power and financial situation improve rapidly.

There is no rush and FHB's are firmly in the drivers seat while these wet dog shacks are and will continue to rot away on Trademe.

by Blackbeard | 30th Jul 24, 10:53am 1722293635

Is it fare to say that Real estate agents and industry project inflationary behaviour. If the goal for the government and RBNZ is to reduce inflation, then they should be targeting such behaviour.

by HGWR | 30th Jul 24, 11:05am 1722294318

I think it's partly true, but an oversimplified view. First home buyers are generally set on buying, but can still be very flexible about timing. I am easily able to buy at the moment, but the interest and expenses would far exceed renting costs, and for a less nice property than where I live now. The only reason to be in a hurry would be if I expected prices to rise rapidly - but that is clearly very unlikely for the foreseeable future, indeed I expect the opposite.

Don't tend to discuss finances with friends but I know at least a couple have been casually looking for 2+ years without buying, I assume it's similar factors keeping them from jumping in yet.

by rastus1 | 30th Jul 24, 11:11am 1722294675

Maybe. But the FHB's I am aware of have held out through the boom and are well aware the market has turned.

The narrative in msm is also changing and the non informed are now getting the message that only those who informed themselves understood.

People are sheep...the bbq chatter housing thoery that the market will tank has yet to catch on.

When it does, the real falls will come.

Patience FHB's.

by sammnz | 30th Jul 24, 11:13am 1722294826

Literally any cut to the OCR will see next weeks' headlines say "mortgage applications surge" or similar.

by Yvil | 30th Jul 24, 1:48pm 1722304118

"When it does, the real falls will come.

Patience FHB's"

Did you copy and paste that comment from 2008? When the average house price was $250k.

Those who listened to your advice then are now locked out of house ownership.

Those who ignored your comment are now more than halfway towards owning their house freehold.

by Pa1nter | 30th Jul 24, 11:59am 1722297593

There is the possibility of a perma crash.

That's super unlikely to increase home ownership.

by HouseMouse | 30th Jul 24, 12:42pm 1722300161

I tend to agree

There is a chance that prices will fall another 10-15%, but who knows. And I think that’s much more unlikely than likely.

I have said several times that if I was a FHB and if I could afford to buy ( a big ‘if’ for many) I would be looking to buy over the next 6 months. But only on the basis of getting a sharp price. What is a ‘sharp price’ will obviously vary from property to property. But generally speaking, around 20 -25% down from peak ‘21/‘22 values

by 1harlow1 | 30th Jul 24, 1:04pm 1722301455

The problem is, nobody is willing to accept even a 15% discounts from 2021 CV's. Specifically at properties I'm considering - upper lower-median quartile, Auckland north-shore. Even properties that have been sat on the market since March/April..

by Zwifter | 30th Jul 24, 1:12pm 1722301938

What else do you expect for a decent property on the North Shore ? As I have said before most people would like to move but they don't have to move and will just sit on their existing property and carry on. Prices on the Shore are crazy, used to live there until a light bulb moment and I took the money and ran.

by 1harlow1 | 30th Jul 24, 1:42pm 1722303768

I expect people to realise that the paper equity they generated up until 2021 is no longer there, and that so long as they are buying somewhere else at a similar discount it doesn't even effect them, in fact it potentially helps them.

The people it does effect are the FHB such as myself who need to take on real debt to pay. Eventually these people will be forced to act on reality rather than sentiment, I'm picking the time will be this summer, after the surge of re-listings in spring.

by Yvil | 30th Jul 24, 1:51pm 1722304279

Then it appears that your expectation is unrealistic.

by 1harlow1 | 30th Jul 24, 2:53pm 1722307984

At present yes it seems that way. I am still gambling that this is the last winter of suspended disbelief for many vendors, and there will be some at least willing to meet the market later this year. Alternatively I will be happier to pay their asking prices after a period of data indicating a sustained recovery.

by rastus1 | 30th Jul 24, 1:23pm 1722302589

They will. I see mortgagee docs regularly now. They take a while.. one this morning was formerly told 8 months ago they were being sold up - it is still under ownership of recovery agent and not yet up for sale.

by 1harlow1 | 30th Jul 24, 1:35pm 1722303310

Mortgagee sale way too risky for me unfortunately! Although I do still hold some hope that vendors will get more realistic before interest rate drops have a meaningful enough impact on buyer wallets..

by bdogg | 30th Jul 24, 1:29pm 1722302985

So a sharp price is a 2023 price. That was 20-25% down from peak. and about 5% down from now.

by rastus1 | 30th Jul 24, 1:18pm 1722302322

Do you really believe your rubbish post will turn the market?

by Yvil | 30th Jul 24, 1:53pm 1722304403

It looks like I hit a nerve there Rastus. You disliking my post and calling it "rubbish" doesn't make it any less true.

by rastus1 | 30th Jul 24, 4:31pm 1722313861

I call it out as a rubbish in the same way msm, aided by real estate advertising has pumped out rubbish.

I question your motives, I suspect entirely driven by self interest. That's how it looks anyway.

by Yvil | 30th Jul 24, 5:54pm 1722318866

So, me encouraging FHBs to own their own home is out of self interest...? How so ? Do you think my post on Interest will change the FHB market...? Or what's your logic ?

by Baywatch | 30th Jul 24, 11:28am 1722295737

And what are they giving up in order to buy this home..having kids?

by Yvil | 30th Jul 24, 11:51am 1722297089

They're giving up having to move whenever the landlord decides, they're giving up paying rent money that is wasted and start paying money that will yield them a freehold house. They're giving up not having the pride of being able to own their own house.

by agnostium | 30th Jul 24, 3:04pm 1722308648

And FHBers what are they giving up?

They're giving up being able to move if they want to or have to, for a better job, for a better partner, for a better lifestyle.

They're giving up using the money they could be using to get better educated and earn more later in life by sinking all their disposable income into a depreciating asset.

They are giving up on their freedom from worry that their most important asset may burn down and they lose everything, that their their house may be a slip risk, or coastal erosion risk, or flood risk.

They are giving up the freedom from having to do maintenance, repairs and upkeep.

They are giving up on saving a bigger deposit to let them borrow less for a house in the future and have more money for retirement.

They are giving up on being patient and throwing money away because they are too impatient to wait for a better deal.

They are giving up living in a much nicer place in a much nicer house than if they just rented.

They're giving up on the idea that living in your own house doesn't somehow make you a better person than someone who doesn't.

by Yvil | 30th Jul 24, 4:02pm 1722312138

Agnostium, you remind me of my late dad. He was a very nice person, but he was also scared of everything ! He rented his whole life till he died, because he always found a reason why it was a bad time to take a chance on anything important.

by Baywatch | 30th Jul 24, 4:28pm 1722313710

The tide has turned on real estate...demographics coming to a rental near you (or not).

Japan showing the way ..Kiwi buys stunning holiday home in Japan for $123,000

by Yvil | 30th Jul 24, 5:51pm 1722318675

This is the result of Japan's population diminishing for 15 straight years ! The population of NZ is the opposite, it's increasing, so the outcomes are going to be different.

by Pa1nter | 30th Jul 24, 9:01pm 1722330105

Yep, the countries with permanently devaluing housing values, are very commonly ones decreasing in population.

And most of their future prospects are worse.

by agnostium | 30th Jul 24, 6:47pm 1722322056

Just providing balance to your constant pro-buy narrative.

There are pros and cons of buying a house in any market, to say what you said is unbalanced and quite frankly reckless

by Yvil | 30th Jul 24, 7:28pm 1722324504

So you don't think it's good for FHBs to own their own house?

by CN - new | 30th Jul 24, 11:16pm 1722338193

"So you don't think it's good for FHBs to own their own house?"

Many people don't even consider this outcome. Are they still happy that they bought and owned today? Sure, they were happy at the purchase date - they just didn't know what they didn't know at that time. They have lost over 100% of their equity deposit (and likely to be their entire lifetime of savings). There are thousands of owner occupier households in NZ in similar circumstances.

https://www.facebook.com/groups/kiwifirsthomebuyers/posts/8220227754664…

by Pa1nter | 30th Jul 24, 11:40pm 1722339611

A few will go under, but most will survive.

Whereas we have many businesses going under, never to survive at all.

Conclusion: in a debt fueled economy, those holding too much when rates go up and times get tight, will be adversely affected.

Is that a good enough reason not to buy a house or start a business?

Probably a lesson in not over extending yourself.

by CN - new | 31st Jul 24, 12:09am 1722341396

"Probably a lesson in not over extending yourself."

If they had bought when house price risks were low, then they might have been able to sell the house at a price above their purchase price and made a gain (or at least a return of their equity deposit)

Instead, they purchased their house when house price risks were extremely elevated and now will experience a total loss of their deposit / lifetime savings.

This is an example of collateral damage in a house price bubble.

Many of the highly leveraged buyers in the 2020 - 2022 period are vulnerable.

Here are examples of owner occupier collateral damage from falling house prices elsewhere around the world:

1) https://www.investorschronicle.co.uk/content/77d27af0-fb2a-53ff-9fe5-51045f0250d1

2) https://youtu.be/iKPG_l1P7lk

3) https://youtu.be/ugBKnP2FKDM

4) https://youtu.be/fiCXsu_4BoA

5) https://youtu.be/1hi7gV9uyK8?t=2297

Those who fail to learn the lessons of history are doomed to repeat them.

by CN - new | 1st Aug 24, 12:10am 1722427837

"If they had bought when house price risks were low, then they might have been able to sell the house at a price above their purchase price and made a gain (or at least a return of their equity deposit)"

Like the house owner in this example who was able to sell above their 2021 purchase price. They were able to recoup their initial equity.

https://www.oneroof.co.nz/news/latest-news/homeowner-dodges-the-downtur…

by CN - new | 31st Jul 24, 2:01am 1722348096

"Whereas we have many businesses going under, never to survive at all."

Isn't that how capitalism works?

Lets quantify that, and put it in context.

It seems like a small percentage of registered companies. There are also businesses operating as sole proprietors and partnerships that are not included in the numbers below.

If we annualise 629 for the last quarter, then that is 2,516 per annum (0.3% of total registered companies, excluding sole proprietorships and partnerships). Some businesses will go into receivership and sold and the names of the owners will change whilst the business continues to operate.

So to use your words, "a few will go under, but most will survive"

For the quarter ended 30 June 2024

There were 731,314 registered companies at 30 June 2024.
During the second quarter of 2024 there were 14,921 new companies incorporated and 10,662 company removals.
- The number of new company registrations during the second quarter of 2024 —
  - decreased by 619 (4.0% decrease) compared with the same quarter in 2023, and
  - increased by 783 (5.5% increase) compared with the same quarter in 2022.
- The number of removals during the second quarter of 2024 —
  - increased by 2,786 (35.6% increase) compared to the same quarter last year, and
  - increased by 3,830 (56.4% increase) compared to the same quarter in 2022.
There were 629 liquidator appointments during the second quarter of 2024 compared to —
- 462 for the same quarter last year (36.1% increase), and
- 312 for the same quarter in 2022 (101.6% increase

https://www.companiesoffice.govt.nz/insights-and-articles/latest-compan…

by Pa1nter | 31st Jul 24, 8:11am 1722370280

So those are companies disappearing. The number stressed will be quite high.

So compare that to mortgages.

by Yvil | 31st Jul 24, 1:57pm 1722391057

"They have lost over 100% of their equity deposit"

Maybe they have lost what many call "paper value" for now, but it won't matter one single bit in the long term. They will end up owning a freehold house, and this temporary decrease in value will be laughable in time.

by CN - new | 31st Jul 24, 2:54pm 1722394451

"Maybe they have lost what many call "paper value" for now, but it won't matter one single bit in the long term. They will end up owning a freehold house, and this temporary decrease in value will be laughable in time."

It seems that the key fact has been missed. How will they end up owning a freehold house? The owners in the example cited need to sell, they are not in a position to keep the house and hence are forced to realise the loss.

by Pa1nter | 30th Jul 24, 8:02pm 1722326543

to say what you said is unbalanced and quite frankly reckless

As a piece of free advice, in this day and age, to have any chance of financial independence or wealth, you're going to need to be a bit reckless.

The days of a comfortable life just by turning up are well over.

by Zwifter | 30th Jul 24, 11:52am 1722297132

Most educated couples have come to the conclusion they don't want kids anyway. Anyone with forward thinking can see this planet is in serious trouble and will take a pass.

by 1harlow1 | 30th Jul 24, 1:07pm 1722301639

Why bother buying a house then if you consider the future to be so bleak it's not even worth fulfilling your primary biological imperative. May as well spend every penny living in the here and now while you can..!

by Zwifter | 30th Jul 24, 1:15pm 1722302135

What's wrong with just enjoying your own life ? Why slave away bringing kids into this world so they can just slave away trying to survive on a planet with fast diminishing resources ? The world population is at least four times what it needs to be, people need to stop breeding so those remaining have a chance at a decent life in the future.

by 1harlow1 | 30th Jul 24, 1:26pm 1722302811

I know people without family, their lives are pretty joyless although they try and fill the gap with material possessions. It gets particularly sad for older people, especially when one of them dies.

There are plenty of reasons people decide not to have kids, and all power to them. But if it's due to pessimism around the future as you suggest, then betting on the status quo seems misguided at best..

by K.W. | 30th Jul 24, 1:49pm 1722304170

You can always move into a retirement village. Having kids is no guarantee that they will still be around in your old age - they may be too busy with their own lives to see you, they may have moved away or overseas, they may not even like you (or you may not like them).
Most people I know with kids have pretty joyless lives - kids are a huge source of stress and a major financial burden. Life without them is much easier.

by 1harlow1 | 30th Jul 24, 2:54pm 1722308073

Look, anyone is free to make their own choices, and more power to you.

You can't really argue against the fact that MOST people feel a significant drive to procreate and also get a deep sense of satisfaction and fulfilment out of their children, that you simply can't find elsewhere. The entire existence of our species is kind of pre-determined on that fact.

by the Joneses | 30th Jul 24, 3:20pm 1722309633

Mate, you don't truly understand unconditional love and true contentment till you own a few rentals!

by interesting1234 | 30th Jul 24, 3:36pm 1722310568

It turns out milking humans is far more profitable than cows so long as the debt cost is cheap

by agnostium | 30th Jul 24, 6:49pm 1722322188

by Jesse1 | 30th Jul 24, 9:02pm 1722330163

So when your kids who are increasingly likely to have challenging mental health problems ask why they are here - you say:

"You are here because I wanted joy in my life and I want you to look after me when I'm old".

Seems very selfish to me.

by Pa1nter | 30th Jul 24, 9:18pm 1722331105

Most humans have come to be merely by the fact their parents enjoyed the friction.

Thinking there's some greater meaning behind us being here is fanciful.

Here we are (supposedly). No need to question it.

by bw | 30th Jul 24, 10:27am 1722292056

"most of the sales decline reported by the REINZ in June was from investors and existing owner-occupiers"

And that trend is likely to accelerate as an ageing society, with fewer and fewer children, doesn't need 3 bedrooms sitting empty in a home, and so downsizers are likely to increase. So will those who years ago planned for their retirement savings to be stored in residential property investments, and they look to unlock their savings to retire on.

And who will buy this increased glut of property for sale? Well not as many as there used to be by the look of it " that decline was significant, the drop in overall housing market activity.... down a whopping 31% compared to May." It's what the next buyer CAN pay that matters.

by HGWR | 30th Jul 24, 11:14am 1722294866

Investors can't buy because their equity has been wiped out. For many of them their strategy relied on repeatedly leveraging unrealised capital gains, a breathtakingly destabilising phenomenon that should never have been allowed.

by CrispyKahawai | 30th Jul 24, 11:36am 1722296175

Totally agree. Absolutely insane for that to have ever been allowed (is it still?).

by dumbthoughts | 30th Jul 24, 11:53am 1722297182

100% this. If we had taken sensible steps to discourage the "unlocking" of equity to purchase investment property (e.g. something as simple as taxing equity release at 33% when used for the purpose of purchasing residential investment property) so much of this madness could have been avoided. We might then have found ourselves not needing to raise interest rates so high, punishing the likes of FHB who just wanted a place to live.

The equity - unrealised capital gains - was effectively being realised on as "good as cash" basis, so considering you pay tax when you earn your deposit money from wages/salary the same should apply here.

If, after fronting up with the required cash to the IRD, you can still make the numbers work, then more power to you for all I care. But at least the playing field would be levelled significantly.

I've got various friends, family members etc who all got into investing in property in the last few years off the back of tools like this https://www.opespartners.co.nz/calculators/useable-equity ... a quick go in there and I find I've got $300k usable equity using my own numbers, which could allow me to buy up to a whopping $1.5 million in new build properties or nearly $900k in existing properties (presuming their calculator is correct?)

I could presumably go and tap this up today and build my portfolio with no cash down. Obviously I'd be having to top up the mortgage each week as cash from rent won't cover that but topping up a few hundred a week, for example, is a lot less of an undertaking than having to cut a cheque to the IRD for $100k if I want to use that equity as outlined above (33% equity release tax).

TBH I probably waste that much each week if I really analysed my spending line by line and cut out every unnecessary cost, so maybe I should just join the herd and leverage up? ;)

The only way we can affect a mindset shift out of "I need to use my equity to build wealth with property" is to tax this so it's more difficult to achieve.

by Nzdan | 30th Jul 24, 12:44pm 1722300295

Like Michael, the 30 something year old "Investment Nomad". Accumulated 17 properties from 2018, putting in at most $300k of his own money according to his NZPI Facebook posts. Apparently he's picked up another 2 properties last week "after weathering a 2 year down turn". Now 19 properties, $6.5m portfolio with $4.5m of debt all at interest only at 3 main banks.

Net profit $57k p.a. before tax (probably why he "chooses" to live out of suitcases in the below article). Has allowed roughly $20k p.a. for repairs/maintenance across all these properties and zero allowance for vacancies.

https://www.informedinvestor.co.nz/meet-the-investment-nomad

by dumbthoughts | 30th Jul 24, 1:55pm 1722304549

This is exactly the sort of scenario an equity release tax would help to prevent.

How many properties would he be able to own if for each one he had needed to pay real cash (which his business appears to be generating very little of in the profit sense) in order to use the equity from previous acquisitions.

$1000 PA per property in maintenance means I'm assuming he is effectively a slum lord (you can blow through $1k in a shopping session at Mitre 10 even if you're doing it yourself)

by SND | 30th Jul 24, 5:38pm 1722317908

19 properties for a total value of $6.5M? Must be a bunch of shitty bungalows in shitty suburbs...

by Nzdan | 30th Jul 24, 6:12pm 1722319961

Well, yeah, I think what he does have going for him is he buys dumps and rents them to Kainga Ora.

by agnostium | 30th Jul 24, 6:52pm 1722322329

Yep, someone challenged him on how his maintenance costs could be so low when he presented his figures and basically he gets KO to pay for everything. Rinsing the taxpayer. This is the model the coalition wants more of.

by dumbthoughts | 31st Jul 24, 7:32am 1722367939

To paraphrase from an episode of Only Fools And Horses...

"Captain of industry? More like a bleedin' stowaway" - that would describe this chap.

by phalanax | 30th Jul 24, 10:40am 1722292838

Meantime 1 Auckland real estate agent has....lol

https://www.stuff.co.nz/home-property/350321923/kiwi-buys-stunning-holi…

by agnostium | 30th Jul 24, 7:00pm 1722322833

Absolutely disgusting and complete disregard for the climate crisis.

Meanwhile AIRNZ first major carrier to drop decarbonisation.

https://www.bbc.com/news/articles/czrjzvep41ro

by stevet | 30th Jul 24, 11:09am 1722294543

No surprises here really. Property investors on the whole have a reasonable understanding of the market and many will have come to the conclusion that investing further right now doesn't make a lot of sense. First home buyers may not have such an understanding of market dynamics but even if they do, they want to get on with owning their own place and as the article states will likely be taking a very long view - which of course they need given the crazy amount of debt required to enter the market.

by HouseMouse | 30th Jul 24, 11:14am 1722294850

Investors are not all immune to challenges to get finance, either, even if they wanted to buy. Obviously some are well enough resourced for it not to be an issue

by huttman | 30th Jul 24, 11:14am 1722294885

investing in residential properties is not looking good at the moment. the rent is not likely to cover running costs, and capital gain is not going to happen in near future.

by Retired-Poppy | 30th Jul 24, 11:50am 1722297030

I will not be the only one here with a sense there is very limited support for todays house prices. Add into the mix there is spreading job insecurity. As is usual heading into spring, there will be an increase in listings combined with those re-listers that pulled earlier in anticipation of firmer prices. Add into the mix Brightline jumpers and the likely outcome will be a flood with further competitive falls in asking prices and therefore further falls in selling prices.

FHB's, take your time build up those deposits. It will remain a true buyers market for some time to come, there is plenty to choose from and there need be no hurry to buy at all.

by starrider | 30th Jul 24, 1:26pm 1722302808

House prices doubled when mortgage rates dropped from 5%ish to 3%ish.

Now that mortgage rates have increased from 3%ish to 7%ish - (100+% increase) house prices are very likely to continue to drop to 2018 levels if not lower. As 2018 mortgage rates were still around 5%ish. So 2015 - 2019 home prices were based on the price of debt being in the 5% range.

The cat is now among the *very fat property speculator* pigeons. Who long ago lost their ability to fly, as they simply lay on the ground gobbling up debt.

by bdogg | 30th Jul 24, 1:38pm 1722303520

You think your statement mirrors each other but, all I can see is a convex mirror that distorts your findings.

'House prices doubled when mortgage rates dropped from 5%ish to 3%ish.

Now that mortgage rates have increased from 3%ish to 7%ish - (100+% increase) house prices are very likely to continue to drop'

Why on earth would they continue to drop when we are around the corner from rates coming down rapidly. Your findings should be - we are at the bottom of the market in this cycle, so buy.

by Zwifter | 30th Jul 24, 4:00pm 1722312045

Yep this is the market bottom, this will be confirmed by an OCR cut quicker than you can buy a house.

by Greeneggsandham | 30th Jul 24, 5:16pm 1722316568

Is there a dataset you used to determine the bottom? HPI, Corelogic 3month rolling average etc?

by agnostium | 30th Jul 24, 7:09pm 1722323372

Feels, reckons and hot takes. It's been the bottom for the last 2 years.

by bdogg | 30th Jul 24, 9:18pm 1722331100

The market bottom was in 2023 when big boi adrian had his lead foot on the rate rise pedal in 5th gear.

Now he is about to plow the gearbox into reverse without using the clutch and use the same lead foot which means the market can hope. Hope is all that is required to keep the market flat.

Prices are up 5% since 2023.

by Time Lord | 31st Jul 24, 8:20am 1722370815

“Prices are up 5% since 2023”

Let’s add data to your claim. HPI over the last 12 months…

NZ +1.3%
Auckland +0.4%

CPI is 3.3% over the last 12 months so house prices are tracking behind inflation.

by Mystery | 30th Jul 24, 6:56pm 1722322610

It seems unlikely that house prices will drop to 2018 levels, at least not nominally (presuming mortgage interest rates will be the same as back then). Not in the light of the fact that salaries, rents, rebuild costs, demand, have all become much higher today than they were back in 2018.

by agnostium | 30th Jul 24, 7:11pm 1722323482

There are plenty that are already selling at 2018 prices. I assume they are the ones where the seller is under pressure to sell and the buyer is a good negotiator. Not sure why you would pay more than 2018 prices as the market stands today.

by Pa1nter | 30th Jul 24, 7:17pm 1722323862

Logically speaking, it's significantly more expensive to generate a new house in 2024 than 2018.

So if the economy is so bad no one can pay 2024 prices, and you can take advantage of it, good call.

by WestieAJ | 30th Jul 24, 12:06pm 1722298010

Last of the washout of first home buyer grants? Not all first home buyers are first home buyers. Is recoupling and new household formation counted in the statistics if one of the joint buyers meets the criteria to be treated as a first home buyer? Even if they have owned property previously.

by agnostium | 30th Jul 24, 7:16pm 1722323803

Also are immigrants who have owned a house abroad classes as fhb'ers when they buy in NZ. In my suburb a few years ago there were plenty of rich immigrants coming from the UK, US and Canada who had owned their foreign houses for years when they arrived in NZ. I've asked before but not got a clear cut answer.

by Mystery | 31st Jul 24, 10:35pm 1722422118

If those migrants are buying a house in NZ for the first time then I am 99.9% sure they are classed as FHB here.

By the way, due to NZD having declined quite a bit over the past year or so, NZ houses have become even more affordable to some foreigners, just because of the exchange rate. Some of them are not necessarily looking for 'entry level' properties, but have the money to go straight for luxury as their first home in NZ.

by agnostium | 31st Jul 24, 12:40am 1722343207

Cool, thanks for clarifying.

So potentially a not insignificant portion of migrants make up the FHB category and they could be older people who have already owned property before in other countries. Good to know when people talk about FHBers, the impression I used to have was that this group was mainly mid 20s/early 30s buying their first home.

by John Mendel | 31st Jul 24, 12:49pm 1722386955

More than 20% reduction of your house price will lead to negative equity, which means home buyers will have to pay dozen/hundred of thousands to the bank -OR- sell their properties, it can cause a financial crisis and believe me, nobody interested in it.

by interesting1234 | 1st Aug 24, 8:32am 1722457970

Don't you mean more than the % of equity held on the house at the given time? If one has 44% equity and loses 20% in value then they are still sound.